Detroit City Council approves revised recreational marijuana ordinance

Detroit — Two years after the city opted to allow recreational marijuana, Detroit's City Council approved a new, more-inclusive ordinance in an effort to award licenses for recreational-use dispensaries in Michigan's largest city.

The development follows a longstanding disagreement among leaders and residents over how much opportunity should specifically be given to longtime Detroiters. The city's initial attempt was discouraged last year after a federal judge ruled its first ordinance approved in 2020 was "likely unconstitutional" for providing too much preference to legacy Detroiters.

On Tuesday, the council voted 8-1 on the latest ordinance following two hours of discussion. At-large Councilwoman Mary Waters voted against it, citing a "broken licensing system" in the ordinance.

“This ordinance is not a perfect ordinance," Mayor Pro Tem James Tate said. "There is an opportunity beyond today to make advancements."

Tate introduced the latest ordinance in February using the same language as the Michigan Marijuana Regulatory Agency's social equity program. That language opens benefits to all residents from 184 communities in the state that were disproportionately affected by the war on drugs, rather than just Detroiters. 

“As (Councilman Scott) Benson says, these are etched in butter, not stone. ... I encourage everyone to continue moving forward and not be discouraged by how challenging this process has been thus far,” he said.

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The ordinance goes into effect on April 20; however, the city's Civil Rights, Inclusion, & Opportunity Department has to provide the council with a recommended date of when licenses can begin being issued, and then, the City Council is required to vote to approve that date. CRIO officials said they will need 90 days to hire a third-party scoring firm for the license applications and to identify a program to host the lottery for any remaining licenses should the scores come to a tie.

Entrepreneurs who obtain a license from the city must also obtain a state license.

City Council President Mary Sheffield said she supported the ordinance because voters overwhelmingly wanted the legalization of recreational marijuana which will "create generational wealth, create revenue for Detroiters, the opportunity for our residents to purchase and consume safe and regulated cannabis within our city limits."

The 2018 ballot proposal to legalize recreational marijuana was supported by 68% of Detroit voters.

"It was a long time coming to the finish line, and I'm glad we're here today," Sheffield said.

Meanwhile, Waters said in a statement she voted no because the ordinance "took away protections for community members."

“The (ordinance) created a licensing system that opens our city up to exploitation from out-state big-business interests," Waters said. "I will continue to stand with the community and will work to ensure that, despite this broken licensing system, longtime Detroiters have a fair shot at owning the marijuana businesses in our city."

Waters also called on the federal government to ensure that marijuana businesses have access to banking services nationwide. Currently, businesses can only accept cash or debit as the plant is not federally legal.

How ordinance works

The new ordinance provides options for provisional licenses, adding social equity and non-equity tracks and creating rounds of distributing 110 total licenses. The licenses, including designated consumption and microbusinesses, will be awarded over three phases that will be spaced out three months apart. 

The 2018 ballot proposal required state regulators to implement a social equity proponent in communities, including Detroit, that "have historically been excluded from ownership opportunities in the legal marijuana industry due to the disproportionate impact of marijuana prohibition, enforcement, the lack of access to capital, land, and resources," according to the city ordinance. 

Longtime Detroit residents, who own at least a 51% stake in a business, can be certified by the city as a “Detroit legacy” applicant and still benefit from city assistance with business plans, reduced costs and fees, networking and discounted zoned city properties.

The ordinance does not limit the number of licenses that may be issued for growers, processors, secured transporters or safety compliance.

In the first round, there will be 20 retailer licenses, five microbusiness licenses and five consumption licenses available for both social equity and non-equity applicants.

In the second round, there will be 15 retail, five microbusiness and five consumption licenses available for each track of applicants.

The highest-scoring applicants out of a 100-point rubric will be put into a lottery for the first licenses.

The system judges applicants' business plan, site control and ability to pay taxes. It requires a "good neighbor" plan — that businesses show how they are committed to hiring Detroiters, purchasing from local businesses, don't overcharge consumers and plan to invest in the surrounding neighborhood to leave a positive impact.

Separately, applicants have the opportunity to score up to 27 additional points by giving away portions of the business to a longtime Detroiter for social-equity certification.

Tate said city officials are in the process of reducing the zoning restriction for dispensaries from 1,000 feet to 750 feet and potentially increasing city funding assistance from $500,000 to $1 million.

Real estate concerns

More than a dozen public commenters joined Tuesday's discussion advocating for more funding for legacy applicants to secure commercial real estate in a "price-gouging market."

In late March, the state announced the distribution of $42 million to 163 local and county governments with licensed adult-use cannabis businesses. Those payments were a share of more than $1.1 billion in recreational marijuana sales reported last fiscal year. 

Detroit has 30 medical marijuana facilities within the city limits, but no recreational business due to the ordinance's hold-up. 

"I am thankful that Detroit will finally join the 23 municipalities in Michigan that have allowed adult-use cannabis licensing within its borders," Tate said later Tuesday. “But the goal has never been to simply have licensing within the city, but to create policy that works to address the inequities that so many Detroiters have experienced trying to pursue an opportunity in this industry.”

Benson supported Tate in his effort, but he previously questioned what could be done with zoning in his 3rd District. The northeast district has the most industrial land qualifying as green zones for dispensary construction, which Benson argued will hurt the area should businesses become concentrated.

Benson said he negotiated with Tate and the administration to include a provision that 2% of gross tax receipts will be allocated toward substance-abuse prevention programs for youth in the city.

Detroit could see 'robust recovery'

Detroit's late entry into the recreational market has done damage, but one expert said she expects the city to recover.

While the Michigan Marijuana Regulatory Agency does not break down marijuana sales geographically, it's no surprise Detroit is already outnumbered with dozens of recreational dispensaries hovering on its borders, said Anquenette Sarfoh, a board member of the Michigan Cannabis Industry Association.

Detroit was one of the first cities in the state to open a medical provisioning center and the two-year wait for recreational sales was fatal to some businesses that expected to be able to expand once Michigan voters OK'd recreational sales, Sarfoh said.

But she expects the strong medical marijuana presence in Detroit and the commitment to buying locally will help Detroit remain competitive.

"I still feel that Detroit is going to be incredibly competitive as they have already established a medical presence. This opens options to people who don't have a medical card and don't want to go to another city," she said. "People want their disposable income dollars back into their community. But also, you have the convenience of delivery services now, not just to medical patients, which makes them much more competitive.

"I see a robust recovery of those dollars."

For consumers, she said eventual recreational sales inside the city limits are "long overdue and about time."

Reef, a medical marijuana center that opened in the city six years ago, is compiling its recreational application for the city and state, its retail director Jimmie Caudill told The News.

"This will be a huge game-changer for the city. It will generate a lot of jobs, tax revenue and for us, we turn away about 50 people daily who don't have med cards," Caudill said. "In comparison to Hazel Park and Warren, we've had to compete by offering exclusive brands and top-of-the-line products, but I don't think it will continue being a problem because Detroit is still an epicenter."

Jess Jackson, co-founder of Copper House Detroit, a bud and breakfast on the city's northwest side, said she'll remain critical about how Detroit initially tried to regulate recreational marijuana. Jackson is pre-qualified with the state and is trying to obtain a microbusiness license for a consumption lounge to grow her business.

"I'm glad it got passed despite the administrative efforts that still need to be implemented for the scoring system," said Jackson, who said her biggest barrier is real estate costs.

Jackson argued the city will be able to catch up to surrounding suburbs, which are already heavily commercialized because Detroit is still a cultural magnet.

"Right now, we're shopping in Ferndale, and what we're paying in Oakland County will be different than Wayne County," Jackson said. "It will keep the industry competitive and ensure their customer isn't going elsewhere. We are large, have a lot of cultural activities in the city and we're going to have an innovative industry no matter how long it takes."

Cannabis owners plea for more

Christian Perine, founder of Blew Amsterdam consumption lounge, is active in the state’s social equity program and is one of the first Black women to obtain an adult-use consumption lounge license for Michigan. Ahead of the vote, she assured the City Council that she has established safety measures to avoid intoxicated driving and eliminate cross intoxication among their workers.

“I think people get hung up on the word drug more than they should, and Blew wants to break that stigma,” she said. “Black people in the industry want to help Detroit more than what’s given to the city through the taxes. We personally want to rebuild the houses and commercial properties, unlike the Detroit businesses that don’t care.”

Sahir Al Salam, one of the owners of Michigan Agriculture Services based in Inkster and Detroit Life Lounge on the city’s east side, advocated for more resources. 

"We are hustlers and we do not give up and I do not want to give up space that I know I deserve," said Al Salem, who was recognized with a momentum award from Eaze cannabis delivery service last month. 

"... Please continue to consult with people in the industry to educate on more than just generational wealth but impactful wealth because it takes support and resources to do what we need to do."

srahal@detroitnews.com

Twitter: @SarahRahal_